MIME-Version: 1.0 X-Document-Type: Workbook Content-Type: multipart/related; boundary="----=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2" This document is a Single File Web Page, also known as a Web Archive file. If you are seeing this message, your browser or editor doesn't support Web Archive files. Please download a browser that supports Web Archive, such as Microsoft Internet Explorer. ------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Workbook.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"

This page should be opened with Microsoft Excel XP or newer.

------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet01.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
Document and Entity Information
3 Months Ended
Aug. 31, 2012
Oct. 02, 2012
Document Information [Line Items]
Document Type 10-Q
Amendment Flag false
Document Period End Date Aug 31, 2012
Document Fiscal Year Focus 2012
Document Fiscal Period Focus Q1
Trading Symbol PRTX
Entity Registrant Name PROTALEX INC
Entity Central Index Key 0001099215
Current Fiscal Year End Date --05-31
Entity Filer Category Smaller Reporting Company
Entity Common Stock, Shares Outstanding 18,926,615
------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet02.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
BALANCE SHEETS (USD $)
Aug. 31, 2012
May 31, 2012
CURRENT ASSETS:
Cash and cash equivalents $ 57,765 $ 190,395
Prepaid expenses 18,643 42,679
Total current assets 76,408 233,074
OTHER ASSETS:
Intellectual technology property, net of accumulated amortization of $12,303 and $12,048 as of August 31, 2012 and May 31, 2012, respectively 7,232 7,487
Total other assets 7,232 7,487
Total Assets 83,640 240,561
CURRENT LIABILITIES:
Accounts payable 390,906 182,861
Accrued expenses 131,767 576,733
Current portion - long term debt 1,828,556 1,594,498
Total current liabilities 2,351,229 2,354,092
LONG TERM LIABILITIES:
Senior Secured Note - related party 2,000,000 1,000,000
Total liabilities 4,376,229 3,364,175
STOCKHOLDERS' DEFICIT
Preferred stock, par value $0.00001, 1,000,000 shares authorized; none issued and outstanding 0 0
Common stock, par value $0.00001, 100,000,000 shares authorized; 18,926,615 and 18,926,615 shares issued and outstanding, respectively 189 189
Additional paid in capital 52,527,013 52,331,016
Deficit accumulated during the development stage (56,819,791) (55,454,819)
Total stockholders' deficit (4,292,589) (3,123,614)
Total liabilities and stockholders' deficit 83,640 240,561
Accrued Interest
LONG TERM LIABILITIES:
Senior Secured Note - related party $ 25,000 $ 10,083
------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet03.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
BALANCE SHEETS (Parenthetical) (USD $)
Aug. 31, 2012
May 31, 2012
Intellectual technology property, accumulated amortization $ 12,303 $ 12,048
Preferred stock, par value $ 0.00001 $ 0.00001
Preferred stock, shares authorized 1,000,000 1,000,000
Preferred stock, shares issued      
Preferred stock, shares outstanding      
Common stock, par value $ 0.00001 $ 0.00001
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 18,926,615 18,926,615
Common stock, shares outstanding 18,926,615 18,926,615
------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet04.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
STATEMENTS OF OPERATIONS (USD $)
3 Months Ended 155 Months Ended
Aug. 31, 2012
Aug. 31, 2011
Aug. 31, 2012
Revenues $ 0 $ 0 $ 0
Operating Expenses
Research and development (including depreciation and amortization) 675,028 354,092 33,217,122
Administrative (including depreciation and amortization) 314,127 178,589 18,783,410
Professional fees 126,611 65,836 4,757,462
Depreciation and amortization 255 255 182,201
Operating loss (1,116,021) (598,772) (56,940,195)
Other income (expense)
Interest income 24 762 2,207,915
Interest expense (248,975) (234,058) (2,087,511)
Net loss $ (1,364,972) $ (832,068) $ (56,819,791)
Weighted average number of common shares outstanding 18,926,615 18,926,615
Loss per common share - basic and diluted $ (0.07) $ (0.04)
------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet05.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (USD $)
3 Months Ended 9 Months Ended 12 Months Ended 155 Months Ended
Aug. 31, 2012
May 31, 2000
May 31, 2012
May 31, 2011
May 31, 2010
May 31, 2009
May 31, 2008
May 31, 2007
May 31, 2006
May 31, 2005
May 31, 2004
May 31, 2003
May 31, 2002
May 31, 2001
Aug. 31, 2012
August 13, 2001 - Contribution by Stockholders $ 143,569
Record beneficial conversion value attached to senior secured convertible debt 1,616,667 521,793
Warrants exercised 300,374 786,538
September 17, 1999 - initial issuance of 2,000 shares for intellectual technology license at $.15 per share 300
Purchase of common stock from stockholder (8,333) (91,667)
June 1, 2006 - May 31, 2007 - stock options exercised (in shares) 400
June 1, 2006 - May 31, 2007 - stock options exercised 15,200
September 30, 1999 - cost of public shell acquisition over net assets acquired to be accounted for as a Recapitalization (250,000)
Common Stock Issued 1,037,500 2,000,000 1,102,000 425,000
September 19, 2003 - repurchase and retired 598,961 shares for $300,000 (300,000)
November 26, 2001 - options issued to board member 133,000
May 31, 2001 - Forgiveness of debt owed to stockholder 40,000
Net loss (1,364,972) (250,689) (4,444,584) (3,357,882) (3,067,842) (7,230,206) (10,490,758) (8,451,942) (6,104,402) (5,567,729) (2,989,364) (1,665,090) (1,280,465) (553,866) (56,819,791)
Ending Balance (4,292,589) 346,655 (3,123,614) 491,826 1,070,819 1,281,127 7,758,065 17,237,798 9,329,595 8,606,813 8,996,388 243,570 355,893 257,789 (4,292,589)
Employee
November 30, 2004 - adjust March 1, 2004 common stock issued to employee (20,000)
Board Members, Employees and Consultants
Share based compensation 753,268 1,011,025 1,826,850
Compensation related to stock options issued 404,679 308,711 448,096 287,343
Private Placement
Common Stock Issued 14,217,721
Employees and Debt Holders
Share based compensation 195,997 829,144 124,722 335,741
Issuance During Period 1st
Common Stock Issued 25,000 1,263,000
Issuance During Period 1st | President
Common Stock Issued 16,418
Issuance During Period 1st | Employee
Common Stock Issued 100,000 38,250
Issuance During Period 2nd
Common Stock Issued 165,400
Issuance During Period 2nd | President
Common Stock Issued 82,841
Issuance During Period 2nd | Employee
Common Stock Issued 25,000
Issuance During Period 2nd | Private Placement
Common Stock Issued 4,851,193 11,356,063
Issuance During Period 3rd | Legal Service
Common Stock Issued 15,000
Issuance During Period 3rd | Employee
Common Stock Issued 11,250
Issuance During Period 3rd | Private Placement
Common Stock Issued 5,510,967
Issuance During Period 3rd | Terminated Employee
Common Stock Issued 102,438
Issuance During Period 4th
Common Stock Issued 640,000
Issuance During Period 4th | Employee
Common Stock Issued 127,500
Issuance During Period 5th | Interest Due
Common Stock Issued 1,644
Common Stock
Warrants exercised (in shares) 26,700 70,320
Warrants exercised 1
February 28, 2005 - Reclass Par Value for Reincorporation into DE as of 12/1/04 (14,702,070)
Purchase of common stock from stockholder (in shares) (2,419) (26,191)
September 17, 1999 - initial issuance of 2,000 shares for intellectual technology license at $.15 per share (in shares) 2,000
September 17, 1999 - initial issuance of 2,000 shares for intellectual technology license at $.15 per share 300
Purchase of common stock from stockholder (8,333) (91,667)
June 1, 2006 - May 31, 2007 - stock options exercised (in shares) 1,200
September 19, 2003 - repurchase and retired 598,961 shares for $300,000 (in shares) (598,961)
Common Stock Issued (in shares) 4,510,870 8,695,652 176,320 85,000
Common Stock Issued 45 87 1,102,000 425,000
September 19, 2003 - repurchase and retired 598,961 shares for $300,000 (300,000)
November 15, 1999 - reverse merger transaction with Enerdyne Corporation, net transaction amounts (in shares) 1,794,493
May 31, 2004 - reclassify common stock contra to common stock (368,547)
November 15, 1999 - reverse merger transaction with Enerdyne Corporation, net transaction amounts 118,547
Ending Balance (in shares) 18,926,615 2,036,728 18,926,615 18,926,615 14,415,745 5,720,093 5,720,093 5,720,093 4,477,990 3,878,644 3,356,887 2,449,591 2,298,048 2,121,728 18,926,615
Ending Balance 189 965,891 189 189 144 57 57 57 45 39 14,683,854 3,758,315 2,492,891 1,390,891 189
Common Stock | Employee
November 30, 2004 - adjust March 1, 2004 common stock issued to employee (20,000)
Common Stock | Private Placement
Common Stock Issued (in shares) 1,214,203
Common Stock Issued 12
Common Stock | Issuance During Period 1st
Common Stock Issued (in shares) 17 168,400
Common Stock Issued 25,000 1,263,000
Common Stock | Issuance During Period 1st | President
Common Stock Issued (in shares) 1,667
Common Stock Issued 16,418
Common Stock | Issuance During Period 1st | Employee
Common Stock Issued (in shares) 8,000 3,000
Common Stock Issued 38,250
Common Stock | Issuance During Period 2nd
Common Stock Issued (in shares) 91,889
Common Stock Issued 165,400
Common Stock | Issuance During Period 2nd | President
Common Stock Issued (in shares) 8,334
Common Stock Issued 82,841
Common Stock | Issuance During Period 2nd | Employee
Common Stock Issued (in shares) 2,000
Common Stock | Issuance During Period 2nd | Private Placement
Common Stock Issued (in shares) 518,757 1,489,129
Common Stock Issued 5 11,356,063
Common Stock | Issuance During Period 3rd | Legal Service
Common Stock Issued (in shares) 20,000
Common Stock Issued 15,000
Common Stock | Issuance During Period 3rd | Employee
Common Stock Issued (in shares) 1,000
Common Stock Issued 11,250
Common Stock | Issuance During Period 3rd | Private Placement
Common Stock Issued (in shares) 519,026
Common Stock Issued 5
Common Stock | Issuance During Period 3rd | Terminated Employee
Common Stock Issued (in shares) 7,880
Common Stock Issued 102,438
Common Stock | Issuance During Period 4th
Common Stock Issued (in shares) 128,000
Common Stock Issued 640,000
Common Stock | Issuance During Period 4th | Employee
Common Stock Issued (in shares) 10,000
Common Stock Issued 127,500
Common Stock | Issuance During Period 5th | Interest Due
Common Stock Issued (in shares) 329
Common Stock Issued 1,644
Additional Paid in Capital
August 13, 2001 - Contribution by Stockholders 143,569
Record beneficial conversion value attached to senior secured convertible debt 1,616,667 521,793
Warrants exercised 300,374 786,537
February 28, 2005 - Reclass Par Value for Reincorporation into DE as of 12/1/04 14,702,070
June 1, 2006 - May 31, 2007 - stock options exercised 15,200
Common Stock Issued 1,037,455 1,999,913
November 26, 2001 - options issued to board member 133,000
May 31, 2001 - Forgiveness of debt owed to stockholder 40,000
Ending Balance 52,527,013 52,331,016 51,501,872 48,723,028 45,865,581 45,112,313 44,101,288 27,741,155 20,913,977 1,052,008 603,912 316,569 40,000 52,527,013
Additional Paid in Capital | Board Members, Employees and Consultants
Share based compensation 753,268 1,011,025 1,826,850
Compensation related to stock options issued 404,679 308,711 448,096 287,343
Additional Paid in Capital | Private Placement
Common Stock Issued 14,217,709
Additional Paid in Capital | Employees and Debt Holders
Share based compensation 195,997 829,144 124,722 335,741
Additional Paid in Capital | Issuance During Period 1st | Employee
Common Stock Issued 100,000
Additional Paid in Capital | Issuance During Period 2nd | Employee
Common Stock Issued 25,000
Additional Paid in Capital | Issuance During Period 2nd | Private Placement
Common Stock Issued 4,851,188
Additional Paid in Capital | Issuance During Period 3rd | Private Placement
Common Stock Issued 5,510,962
Common Stock- Contra
September 30, 1999 - cost of public shell acquisition over net assets acquired to be accounted for as a Recapitalization (250,000)
May 31, 2004 - reclassify common stock contra to common stock 368,547
November 15, 1999 - reverse merger transaction with Enerdyne Corporation, net transaction amounts (118,547)
Ending Balance (368,547) (368,547) (368,547) (368,547)
Deficit Accumulated During The Development Stage
Net loss (1,364,972) (250,689) (4,444,584) (3,357,882) (3,067,842) (7,230,206) (10,490,758) (8,451,942) (6,104,402) (5,567,729) (2,989,364) (1,665,090) (1,280,465) (553,866)
Ending Balance $ (56,819,791) $ (250,689) $ (55,454,819) $ (51,010,235) $ (47,652,353) $ (44,584,511) $ (37,354,305) $ (26,863,547) $ (18,411,605) $ (12,307,203) $ (6,739,474) $ (3,750,110) $ (2,085,020) $ (804,555) $ (56,819,791)
------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet06.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (Parenthetical) (USD $)
9 Months Ended 12 Months Ended 9 Months Ended 12 Months Ended 9 Months Ended 12 Months Ended
May 31, 2000
May 31, 2011
May 31, 2010
May 31, 2004
May 31, 2003
May 31, 2002
May 31, 2001
May 31, 2000
Issuance During Period 1st
May 31, 2003
Issuance During Period 1st
May 31, 2000
Issuance During Period 2nd
May 31, 2000
Issuance During Period 4th
May 31, 2000
Legal Service
Issuance During Period 3rd
May 31, 2000
Interest Due
Issuance During Period 5th
May 31, 2004
President
Issuance During Period 1st
May 31, 2003
President
Issuance During Period 2nd
May 31, 2006
Employee
Issuance During Period 1st
May 31, 2005
Employee
Issuance During Period 1st
May 31, 2006
Employee
Issuance During Period 2nd
May 31, 2003
Employee
Issuance During Period 3rd
May 31, 2004
Employee
Issuance During Period 4th
May 31, 2007
Private Placement
May 31, 2005
Private Placement
Issuance During Period 2nd
May 31, 2004
Private Placement
Issuance During Period 2nd
May 31, 2006
Private Placement
Issuance During Period 3rd
May 31, 2004
Terminated Employee
Issuance During Period 3rd
Common Stock issued, per share $ 0.15 $ 0.23 $ 6.25 $ 5 $ 7.5 $ 1.8 $ 5 $ 12.75 $ 12.75 $ 12.5 $ 9.75 $ 8.5 $ 11.25 $ 13
Common Stock issued, issuance start date Nov 18, 1999 May 1, 2000 Jan 15, 2003
Common Stock issued, issuance date Sep 17, 1999 Feb 11, 2011 Nov 11, 2009 Nov 7, 2001 Dec 7, 2000 Oct 27, 1999 Jul 5, 2002 Jan 1, 2000 May 27, 2000 Jun 15, 2003 Aug 23, 2005 Jan 13, 2005 Oct 19, 2005 May 14, 2003 Mar 1, 2004 Jul 7, 2006 May 25, 2005 Sep 18, 2003 Dec 30, 2005 Dec 12, 2003
Common Stock issued, issuance end date Feb 7, 2000 May 27, 2000 May 15, 2003
Common stock shares repurchased, per share $ 3.5
Common stock shares repurchased, start date Jul 1, 2002
Common stock shares repurchased, end date May 1, 2003
Common stock shares repurchased, date Jun 15, 2003
Common stock shares repurchased and retired, date Sep 19, 2003
------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet07.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
STATEMENTS OF CASH FLOWS (USD $)
3 Months Ended 155 Months Ended
Aug. 31, 2012
Aug. 31, 2011
Aug. 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,364,972) $ (832,068) $ (56,819,791)
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities
(Gain) on disposal of equipment, net 0 0 (81,544)
Depreciation and amortization 234,313 218,980 2,204,443
Equity based expense 195,997 75,859 7,882,993
(Increase)/decrease in:
Prepaid expenses and deposits 24,036 22,094 (26,633)
Increase/(decrease) in:
Accounts payable and accrued expenses (222,004) (54,777) 547,673
Net cash and cash equivalents used in operating activities (1,132,630) (569,912) (46,292,869)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of intellectual technology license - fee portion 0 0 (20,000)
Refund of security deposits 0 0 7,990
Acquisition of equipment 0 0 (905,936)
Excess of amounts paid for public shell over assets acquired to be accounted for as a recapitalization 0 0 (250,000)
Proceeds from disposal of equipment 0 0 229,135
Net cash and cash equivalents used in investing activities 0 0 (938,811)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock issuance, including options and warrants exercised 0 0 42,658,458
Principal payment on equipment notes payable and capital leases 0 0 (295,411)
Contribution by stockholders 0 0 183,569
Principal payment on note payable to individuals 0 0 (225,717)
Issuance of note payable to individuals 1,000,000 0 5,368,546
Acquisition of common stock 0 0 (400,000)
Net cash and cash equivalents provided by financing activities 1,000,000 0 47,289,445
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (132,630) (569,912) 57,765
Cash and cash equivalents, beginning of period 190,395 1,542,025 0
Cash and cash equivalents, ending of period 57,765 972,113 57,765
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
Interest paid 0 0 66,770
Taxes paid 0 0 100
NON-CASH FINANCING ACTIVITIES:
Conversion of debt for equity $ 0 $ 0 $ 1,037,500
------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet08.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
ORGANIZATION AND BUSINESS ACTIVITIES
3 Months Ended
Aug. 31, 2012
ORGANIZATION AND BUSINESS ACTIVITIES

NOTE 1. ORGANIZATION AND BUSINESS ACTIVITIES

 

Protalex, Inc., a Delaware corporation, (“we,” “us,” “our,” the “Company” or “its”) is a development stage company which has been engaged in developing a class of biopharmaceutical drugs for treating autoimmune inflammatory diseases. Our lead product, PRTX-100, is formulated with highly-purified staphylococcal protein A, which is an immune modulating protein produced by bacteria. The Company does not anticipate generating operating revenue for the foreseeable future.

 

The Company maintains an administrative office in Summit, New Jersey and currently outsources all of its product development and regulatory activities, including clinical trial activities, manufacturing and laboratory operations to third-party contract research organizations and facilities.

 

In April 2009, the Company ceased all operations and terminated all employees in light of insufficient funds to continue its clinical trials and related product development. The Company’s business was dormant until new management took control of its operations in November 2009 following the change in control transaction more fully described below. The Company is currently actively pursuing the commercial development of PRTX-100 for the treatment of RA.

 

On December 8, 2010, the Company effected a reverse stock split of the outstanding shares of its common stock, with par value of $0.00001 per share (“Common Stock”), on the basis of one share of Common Stock for each five shares of Common Stock outstanding. Unless otherwise noted, all references in these financial statements and notes to financial statements to number of shares, price per share and weighted average number of shares outstanding of Common Stock prior to this reverse stock split have been adjusted to reflect the reverse stock split on a retroactive basis.

 

PRTX-100 has demonstrated effectiveness in animal models of autoimmune diseases as well as demonstrated activity on cultured human immune cells at very low concentrations, although the effectiveness of PRTX-100 shown in pre-clinical studies using animal models may not be predictive of the results that the Company would see in future human clinical trials. In August 2010, the Company commenced a multi-center Phase 1b clinical trial of PRTX-100 in South Africa in adult patients with active RA on methotrexate. The RA Study was a proof of concept study to evaluate safety and potential efficacy of PRTX-100 in patients with active RA and was approved to enroll up to 40 patients in four dose escalating cohorts. In January 2012, the Company completed patient dosing in the fourth cohort of the RA Study. A total of 37 patients were enrolled in four cohorts ranging from 0.15 μg/kg to 1.50 μg/kg of PRTX-100 or placebo, administered weekly for four weeks. Safety and disease were evaluated over 16 weeks following the first dose. The RA Study results demonstrated that PRTX-100 was generally safe and well-tolerated in patients with active RA at all dose levels. More patients in the 0.90 mg/kg and 1.50 mg/kg cohorts showed improvement in their CDAI (Clinical Disease Activity Index for RA) than did patients in the lower dose or placebo cohorts. The safety, tolerability, and pharmacokinetics (PK) of PTRX-100 in humans have now been characterized in four clinical studies. The Company currently markets no products.

------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet09.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
CHANGE OF OWNERSHIP TRANSACTION
3 Months Ended
Aug. 31, 2012
CHANGE OF OWNERSHIP TRANSACTION

NOTE 2. CHANGE OF OWNERSHIP TRANSACTION

 

On November 11, 2009 (the “Effective Date”), we consummated a financing transaction in which we raised $3,000,000 of additional working capital pursuant to a Securities Purchase Agreement (the “Purchase Agreement”) with Niobe Ventures, LLC, a Delaware limited liability company (the “Financing”). Pursuant to the Purchase Agreement, we issued to Niobe Ventures, LLC (“Niobe”), (i) 8,695,652 restricted shares of our Common Stock at a purchase price of $0.23 per share (or $2,000,000 in the aggregate) and (ii) a senior secured convertible promissory note in the principal amount of $1,000,000 convertible into shares of our Common Stock at an initial conversion price equal to $0.23 per share (the “$1 Million Secured Note”). On February 11, 2011, Niobe converted the $1 Million Secured Note, including $37,500 of accrued interest thereon, into 4,510,870 shares of our Common Stock.

 

For the purpose of providing the Company with additional working capital, on February 11, 2011, pursuant to a Credit Facility Agreement dated as of December 2, 2009 (the “Facility”) between the Company and Niobe, the Company issued to Niobe a senior secured convertible promissory note in the principal amount of $2,000,000 (the “$2 Million Secured Note”). The $2 Million Secured Note is convertible into shares of Common Stock at a conversion price equal to $0.23 per share, for an aggregate of 8,695,652 shares of Common Stock (net of accrued interest thereon), bears interest at a rate of 3% per annum and matures on December 31, 2012.

 

Our obligations under the $2 Million Secured Note are secured by an Amended Security Agreement (as defined in Note 8, below) which granted Niobe a security interest in substantially all of our personal property and assets, including our intellectual property. The $2 Million Secured Note is convertible at any time, by the holder, subject only to the requirement that we have sufficient authorized shares of Common Stock after taking into account all outstanding shares of Common Stock and the maximum number of shares issuable under all issued and outstanding convertible securities.  In addition, the $2 Million Secured Note will automatically be converted if we undertake certain Fundamental Transactions, as defined in the $2 Million Secured Note, (such as a merger, sale of all of our assets, exchange or tender offer, or reclassification of our stock or compulsory exchange).  The $2 Million Secured Note also provides for the adjustment of the conversion price in the event of stock dividends and stock splits, and provides for acceleration of maturity, at the holder’s option, upon an event of default, as defined in the $2 Million Secured Note.

 

The securities issued in the Financing were issued in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Act”) pursuant to Section 4(6) and Rule 506 of Regulation D thereof.  The offer, sale and issuance of such securities were made without general solicitation or advertising. The securities were offered and issued only to “accredited investors” as such term is defined in Rule 501 under the Act.

------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet10.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
GOING CONCERN
3 Months Ended
Aug. 31, 2012
GOING CONCERN

NOTE 3. GOING CONCERN

 

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The ability of the Company to continue as a going concern is dependent upon developing products that are regulatory approved and market accepted. There is no assurance that these plans will be realized in whole or in part. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

 

Since inception, the Company has incurred an accumulated deficit of $56,819,791 through August 31, 2012. For the years ended May 31, 2012 and 2011, the Company had net losses of $4,444,584 and $3,357,882, respectively and for the three months ended August 31, 2012, the Company had a net loss of $1,364,972. The Company has used $2,351,630 and $2,808,059 of cash in operating activities for the years ended May 31 2012 and 2011, respectively and $1,132,630 during the three months ended August 31, 2012. As of August 31, 2012, the Company had cash and cash equivalents of $57,765 and negative net working capital of $2,274,821. The Company has incurred negative cash flow from operating activities since its inception. The Company has spent, and subject to obtaining additional financing, expects to continue to spend, substantial amounts in connection with executing its business strategy, including continued development efforts relating to PRTX-100.

 

Other than the December 31, 2012 maturity of the $2 Million Secured Note, the Company has no significant payments due on long-term obligations. However, the Company anticipates entering into significant contracts to perform product manufacturing and clinical trials in 2012 and that it will need to raise additional capital in the future to fund the ongoing FDA approval process. If the Company is unable to obtain approval of its future IND applications or otherwise advance in the FDA approval process, its ability to sustain its operations would be significantly jeopardized.

 

The most likely sources of additional financing include the private sale of the Company’s equity or debt securities or loans from majority stockholders. Additional capital that is required by the Company may not be available on reasonable terms, or at all.

------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet11.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
BASIS OF PRESENTATION
3 Months Ended
Aug. 31, 2012
BASIS OF PRESENTATION

NOTE 4. BASIS OF PRESENTATION

 

The interim financial data contained in this Report is unaudited; however in the opinion of management, the interim data includes all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the interim period. The financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures included herein are adequate to make the information presented not misleading.  The results of operations in interim periods are not necessarily indicative of the results that may be expected for the full year.

 

Information regarding the organization and business of the Company, accounting policies followed by the Company and other important information is contained in the notes to the Company's financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2012. This quarterly report should be read in conjunction with our annual report.

------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet12.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3 Months Ended
Aug. 31, 2012
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Cash and Cash Equivalents

 

For the purposes of reporting cash flows, the Company considers all cash accounts which are not subject to withdrawal restrictions or penalties, and highly liquid investments with original maturities of 60 days or less to be cash and cash equivalents. The cash and cash equivalent deposits are not insured by The Federal Deposit Insurance Corporation.

 

Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions affecting the reported amounts of assets, liabilities, revenues and expense, and the disclosure of contingent assets and liabilities. Estimated amounts could differ materially from actual results.

 

Loss per Common Share

 

The Financial Accounting Standards Board (FASB) has issued guidance for “Earnings Per Share” which provides for the calculation of “Basic” and “Diluted” earnings per share. Basic earnings per share includes no dilution and is computed by dividing net loss to common stockholders by the weighted average number of common shares outstanding for the period. All potentially dilutive securities consisting of employee stock options and warrants have been excluded from the computations since they would be antidilutive. However, these dilutive securities could potentially dilute earnings per share in the future. As of August 31, 2012 the Company had potentially dilutive securities consisting of 2,642,191 stock options. As of August 31, 2011, the Company had potentially dilutive securities consisting of 1,538,927 stock options.

 

Share Based Compensation

 

Effective June 1, 2006, the Company adopted the FASB accounting guidance for fair value recognition provisions of the “Accounting for Share-Based Payment” using the modified prospective method. This standard requires the Company to measure the cost of employee services received in exchange for equity share options granted based on the grant-date fair value of the options. The cost is recognized as compensation expense over the vesting period of the options. Under the modified prospective method $195,997 and $75,859 compensation cost is included in operating expenses for the three months ended August 31, 2012 and 2011, respectively. These amounts included both the compensation cost of stock options granted prior to but not yet vested as of June 1, 2006 and compensation cost for all options granted subsequent to May 31, 2006. In accordance with the modified prospective application transition method, prior period results are not restated.  Incremental compensation cost for a modification of the terms or conditions of an award is measured by comparing the fair value of the modified award with the fair value of the award immediately before the modification. No tax benefit was recorded as of May 31, 2012 in connection with these compensation costs due to the uncertainty regarding ultimate realization of certain net operating loss carryforwards. The Company has also implemented the SEC interpretations in Staff Accounting Bulletin (“SAB”) for “Share-Based Payments”, in connection with the adoption of FASB accounting guidance.

  

The Board of Directors adopted and the stockholders approved the 2003 Stock Option Plan on October 2003 and it was amended in October 2005. The plan was adopted to recognize the contributions made by the Company’s employees, officers, consultants, and directors, to provide those individuals with additional incentive to devote themselves to the Company’s future success, and to improve the Company’s ability to attract, retain and motivate individuals upon whom the Company’s growth and financial success depends. Under the plan, stock options may be granted as approved by the Board of Directors or the Compensation Committee. There are 900,000 shares reserved for grants of options under the plan, of which 88,800 have been issued and 800 were exercised. The Company has issued 271,784 stock options as standalone grants, of which 400 were exercised. Stock options vest pursuant to individual stock option agreements. No options granted under the plan are exercisable after the expiration of ten years (or less in the discretion of the Board of Directors or the Compensation Committee) from the date of the grant. The plan will continue in effect until terminated or amended by the Board of Directors.

 

The accounting guidance requires the use of a valuation model to calculate the fair value of each stock-based award. The Company uses the Black-Scholes model to estimate the fair value of stock options granted based on the following assumptions:

 

Expected Term or Life. The expected term or life of stock options granted issued represents the expected weighted average period of time from the date of grant to the estimated date that the stock option would be fully exercised. The weighted average expected option term was determined using a combination of the “simplified method” for plain vanilla options as allowed by the accounting guidance. The “simplified method” calculates the expected term as the average of the vesting term and original contractual term of the options.

 

Expected Volatility. Expected volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate. Expected volatility is based on the historical daily volatility of the price of our common shares. The Company estimated the expected volatility of the stock options at grant date.

 

Risk-Free Interest Rate. The risk-free interest rate is based on the implied yield on U.S. Treasury zero-coupon issues with remaining terms equivalent to the expected term of our stock-based awards.

 

As of August 31, 2012, there were 2,642,191 stock options outstanding.  At August 31, 2012, the aggregate unrecognized compensation cost of unvested options, as determined using a Black-Scholes option valuation model was approximately $422,552 (net of estimated forfeitures) will be recognized ratably through July 31, 2014.  The remaining amount of options will be valued once they vest upon the future events. During the three months ended August 31, 2012, the Company granted 400,000 stock options and 26,736 options expired.

 

The fair value of the options is estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions:

 

   

Three Months Ended

August 31, 2012

   

Three Months Ended

August 31, 2011

   

From Inception

Through

August 31, 2012

 
Dividends per year   0     0     0  
Volatility percentage     97.5 %     97.5 %     90%-112%  
Risk free interest rate     3.47 %     3.47 %     2.07%-5.11%  
Expected life (years)     7.0-10.0       5.0-9.0       3-10  
Weighted Average Fair Value   $ 1.07     $ 1.10     $ 2.41  
------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet13.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
RECENT ACCOUNTING PRONOUNCEMENTS
3 Months Ended
Aug. 31, 2012
RECENT ACCOUNTING PRONOUNCEMENTS

NOTE 6. RECENT ACCOUNTING PRONOUNCEMENTS

 

Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying consolidated financial statements. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances.

------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet14.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
RELATED PARTIES
3 Months Ended
Aug. 31, 2012
RELATED PARTIES

NOTE 7. RELATED PARTIES

 

Niobe, the majority stockholder of the Company and the holder of the 2012 Secured Notes (defined in Note 9, below), is controlled by Arnold P. Kling, the Company’s president and director.

 

During the year ended May 31, 2012, the Company issued an aggregate of 450,000 options to John Doherty, one of our directors, and Kirk M. Warshaw, our chief financial officer and director.

 

The Company’s principal offices are located at 133 Summit Avenue, Suite 22, Summit, New Jersey which are owned by Kirk M. Warshaw, LLC (the “LLC”), an affiliated company of Kirk Warshaw, the Company’s chief financial officer. The Company occupies its principal offices on a month to month basis. On March 1, 2010, it began paying a monthly fee of $500 to the LLC for the use and occupancy, and administrative services, related to its principal offices.

------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet15.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
SENIOR SECURED NOTES - RELATED PARTY
3 Months Ended
Aug. 31, 2012
Senior Secured Notes
SENIOR SECURED NOTES - RELATED PARTY

NOTE 9. SENIOR SECURED NOTE - RELATED PARTY

 

On February 1, 2012, the Company raised $1,000,000 of working capital pursuant to a loan from Niobe. The Company issued to Niobe a secured promissory note in the principal amount of $1,000,000 (the “February Secured Note”). The February Secured Note bears interest at a rate of 3% per annum and matures on February 1, 2014.

 

On June 5, 2012, the Company raised an additional $1,000,000 of working capital pursuant to a loan from Niobe and issued to Niobe a secured promissory note in the principal amount of $1,000,000, which bears interest at a rate of 3% per annum and matures on May 31, 2014 (the “June Secured Note”). Collectively, the February Secured Note and the June Secured Note are hereinafter referred to as the “2012 Secured Notes.”

 

The Company’s obligations under the 2012 Secured Notes are secured by a security agreement granting Niobe a security interest in substantially all of the Company’s personal property and assets, including its intellectual property, to collateralize all amounts due under the 2012 Secured Notes. In addition, payment of the principal and accrued interest on the 2012 Secured Notes will, at Niobe’s election, automatically become immediately due and payable if the Company undertakes certain Fundamental Transactions or upon an Event of Default, both as defined in the 2012 Secured Notes.

Senior Secured Convertible Notes
SENIOR SECURED NOTES - RELATED PARTY

NOTE 8. SENIOR SECURED CONVERTIBLE NOTES - RELATED PARTY

 

On the Effective Date, the Company issued the $1 Million Secured Note to Niobe, its majority stockholder which is controlled by Arnold P. Kling, our president and director.  The $1 Million Secured Note bore interest at a rate of 3% per annum and had a scheduled maturity on November 13, 2012.  Our obligations under the $1 Million Secured Note were secured by a Security Agreement dated the Effective Date (the “Security Agreement”) which granted Niobe a security interest in substantially all of our personal property and assets, including our intellectual property. On February 11, 2011, Niobe converted the $1 Million Secured Note, including $37,500 of accrued interest thereon, into 4,510,870 shares of our Common Stock.

 

On December 2, 2009, the Company entered into the Facility with Niobe pursuant to which Niobe agreed to provide up to $2,000,000 of additional capital in the form of secured loans at any time prior to June 30, 2012 subject to the achievement of certain predetermined benchmarks. In connection with the Facility, on December 2, 2009, the Security Agreement securing our obligations under the $1 Million Secured Note was amended and restated to also secure any incremental obligations under the Facility (the “Amended Security Agreement”). Pursuant to the Amended Security Agreement, Niobe has a security interest in substantially all of our personal property and assets, including its intellectual property to collateralize all amounts due to it under the $1 Million Secured Note and the Facility.

 

Pursuant to the Facility, on February 11, 2011, we received $2,000,000 of additional working capital from Niobe and issued the $2 Million Secured Note to Niobe. The $2 Million Secured Note bears interest at a rate of 3% per annum and matures on December 31, 2012.

 

Our obligations under the $2 Million Secured Note are secured by an Amended Security Agreement. The $2 Million Secured Note is convertible at any time, by the holder, subject only to the requirement that we have sufficient authorized shares of Common Stock after taking into account all outstanding shares of Common Stock and the maximum number of shares issuable under all issued and outstanding convertible securities.  In addition, the $2 Million Secured Note will automatically be converted if we undertake certain Fundamental Transactions, as defined in the $2 Million Secured Note, (such as a merger, sale of all of our assets, exchange or tender offer, or reclassification of our stock or compulsory exchange).  The $2 Million Secured Note also provides for the adjustment of the conversion price in the event of stock dividends and stock splits, and provides for acceleration of maturity, at the holder’s option, upon an event of default, as defined in the $2 Million Secured Note.

 

The Company evaluated the conversion feature of the $2 Million Secured Note and determined that under the accounting guidance for “Accounting for Convertible Securities with Beneficial Conversion Features” that a value should be attributed to the embedded conversion feature. On February 11, 2011, the date of issuance of the $2 Million Secured Note, the fair market value of the Company’s Common Stock was $1.20 per share. The Company determined the allocation to the conversion feature to be $1,616,667 which reduced the face amount of the convertible debt carried on our balance sheet. This discount will be amortized over 22 months and will serve to increase the interest expense of the $2 Million Secured Note during its term.

------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet16.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
SUBSEQUENT EVENTS
3 Months Ended
Aug. 31, 2012
SUBSEQUENT EVENTS

NOTE 10. SUBSEQUENT EVENTS

 

Subsequent to August 31, 2012, the Company raised $800,000 of additional working capital pursuant to loans from Niobe and issued to Niobe secured promissory notes in the principal amount of $800,000.  The terms and conditions of the notes are the same as the ones that govern the 2012 Secured Notes. 

 

The Company has evaluated subsequent events and has determined that there were no other subsequent events to recognize or disclose in these financial statements.

------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet17.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
3 Months Ended
Aug. 31, 2012
Cash and Cash Equivalents

Cash and Cash Equivalents

 

For the purposes of reporting cash flows, the Company considers all cash accounts which are not subject to withdrawal restrictions or penalties, and highly liquid investments with original maturities of 60 days or less to be cash and cash equivalents. The cash and cash equivalent deposits are not insured by The Federal Deposit Insurance Corporation.

Estimates

Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions affecting the reported amounts of assets, liabilities, revenues and expense, and the disclosure of contingent assets and liabilities. Estimated amounts could differ materially from actual results.

Loss per Common Share

Loss per Common Share

 

The Financial Accounting Standards Board (FASB) has issued guidance for “Earnings Per Share” which provides for the calculation of “Basic” and “Diluted” earnings per share. Basic earnings per share includes no dilution and is computed by dividing net loss to common stockholders by the weighted average number of common shares outstanding for the period. All potentially dilutive securities consisting of employee stock options and warrants have been excluded from the computations since they would be antidilutive. However, these dilutive securities could potentially dilute earnings per share in the future. As of August 31, 2012 the Company had potentially dilutive securities consisting of 2,642,191 stock options. As of August 31, 2011, the Company had potentially dilutive securities consisting of 1,538,927 stock options.

Share Based Compensation

Share Based Compensation

 

Effective June 1, 2006, the Company adopted the FASB accounting guidance for fair value recognition provisions of the “Accounting for Share-Based Payment” using the modified prospective method. This standard requires the Company to measure the cost of employee services received in exchange for equity share options granted based on the grant-date fair value of the options. The cost is recognized as compensation expense over the vesting period of the options. Under the modified prospective method $195,997 and $75,859 compensation cost is included in operating expenses for the three months ended August 31, 2012 and 2011, respectively. These amounts included both the compensation cost of stock options granted prior to but not yet vested as of June 1, 2006 and compensation cost for all options granted subsequent to May 31, 2006. In accordance with the modified prospective application transition method, prior period results are not restated.  Incremental compensation cost for a modification of the terms or conditions of an award is measured by comparing the fair value of the modified award with the fair value of the award immediately before the modification. No tax benefit was recorded as of May 31, 2012 in connection with these compensation costs due to the uncertainty regarding ultimate realization of certain net operating loss carryforwards. The Company has also implemented the SEC interpretations in Staff Accounting Bulletin (“SAB”) for “Share-Based Payments”, in connection with the adoption of FASB accounting guidance.

  

The Board of Directors adopted and the stockholders approved the 2003 Stock Option Plan on October 2003 and it was amended in October 2005. The plan was adopted to recognize the contributions made by the Company’s employees, officers, consultants, and directors, to provide those individuals with additional incentive to devote themselves to the Company’s future success, and to improve the Company’s ability to attract, retain and motivate individuals upon whom the Company’s growth and financial success depends. Under the plan, stock options may be granted as approved by the Board of Directors or the Compensation Committee. There are 900,000 shares reserved for grants of options under the plan, of which 88,800 have been issued and 800 were exercised. The Company has issued 271,784 stock options as standalone grants, of which 400 were exercised. Stock options vest pursuant to individual stock option agreements. No options granted under the plan are exercisable after the expiration of ten years (or less in the discretion of the Board of Directors or the Compensation Committee) from the date of the grant. The plan will continue in effect until terminated or amended by the Board of Directors.

 

The accounting guidance requires the use of a valuation model to calculate the fair value of each stock-based award. The Company uses the Black-Scholes model to estimate the fair value of stock options granted based on the following assumptions:

 

Expected Term or Life. The expected term or life of stock options granted issued represents the expected weighted average period of time from the date of grant to the estimated date that the stock option would be fully exercised. The weighted average expected option term was determined using a combination of the “simplified method” for plain vanilla options as allowed by the accounting guidance. The “simplified method” calculates the expected term as the average of the vesting term and original contractual term of the options.

 

Expected Volatility. Expected volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate. Expected volatility is based on the historical daily volatility of the price of our common shares. The Company estimated the expected volatility of the stock options at grant date.

 

Risk-Free Interest Rate. The risk-free interest rate is based on the implied yield on U.S. Treasury zero-coupon issues with remaining terms equivalent to the expected term of our stock-based awards.

 

As of August 31, 2012, there were 2,642,191 stock options outstanding.  At August 31, 2012, the aggregate unrecognized compensation cost of unvested options, as determined using a Black-Scholes option valuation model was approximately $422,552 (net of estimated forfeitures) will be recognized ratably through July 31, 2014.  The remaining amount of options will be valued once they vest upon the future events. During the three months ended August 31, 2012, the Company granted 400,000 stock options and 26,736 options expired.

 

The fair value of the options is estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions:

 

   

Three Months Ended

August 31, 2012

   

Three Months Ended

August 31, 2011

   

From Inception

Through

August 31, 2012

 
Dividends per year   0     0     0  
Volatility percentage     97.5 %     97.5 %     90%-112%  
Risk free interest rate     3.47 %     3.47 %     2.07%-5.11%  
Expected life (years)     7.0-10.0       5.0-9.0       3-10  
Weighted Average Fair Value   $ 1.07     $ 1.10     $ 2.41  
------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet18.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
3 Months Ended
Aug. 31, 2012
Fair Value of Assumptions of Options Estimated On Grant Date

The fair value of the options is estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions:

 

   

Three Months Ended

August 31, 2012

   

Three Months Ended

August 31, 2011

   

From Inception

Through

August 31, 2012

 
Dividends per year   0     0     0  
Volatility percentage     97.5 %     97.5 %     90%-112%  
Risk free interest rate     3.47 %     3.47 %     2.07%-5.11%  
Expected life (years)     7.0-10.0       5.0-9.0       3-10  
Weighted Average Fair Value   $ 1.07     $ 1.10     $ 2.41  
------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet19.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
ORGANIZATION AND BUSINESS ACTIVITIES - Additional Information (Detail) (USD $)
1 Months Ended
Jan. 31, 2012
Person
Aug. 31, 2010
Person
Aug. 31, 2012
May 31, 2012
Dec. 08, 2010
Organization and Nature of Operations [Line Items]
Reverse stock split, Common stock, par value $ 0.00001 $ 0.00001 $ 0.00001
Reverse stock split ratio 0.2
Number of patients approved to enroll in four dose escalating cohorts 40
Number of patients enrolled in four dose escalating cohorts 37
------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet20.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
CHANGE OF OWNERSHIP TRANSACTION - Additional Information " (Detail) (USD $)
3 Months Ended 9 Months Ended 12 Months Ended 1 Months Ended
Aug. 31, 2012
May 31, 2000
May 31, 2011
May 31, 2010
May 31, 2002
May 31, 2001
Feb. 11, 2011
Niobe Ventures, LLC
Senior Secured Note
Credit Facility Agreement
Nov. 11, 2009
Niobe Ventures, LLC
Securities Purchase Agreement
Feb. 11, 2011
Niobe Ventures, LLC
Securities Purchase Agreement
Senior Secured Note
Nov. 11, 2009
Niobe Ventures, LLC
Securities Purchase Agreement
Senior Secured Note
Class of Stock [Line Items]
Additional working capital raised $ 3,000,000
Restricted shares of Common Stock issued 8,695,652
Restricted shares of Common Stock issued, price per share $ 0.15 $ 0.23 $ 6.25 $ 5 $ 0.23
Restricted shares of Common Stock issued, value 1,037,500 2,000,000 1,102,000 425,000 2,000,000
Senior secured convertible promissory note 2,000,000 1,000,000
Senior secured convertible promissory note, conversion price per share $ 0.23 $ 0.23
Accrued interest on senior secured convertible promissory note $ 37,500
Shares of Common Stock issued upon conversion of senior secured convertible promissory note 4,510,870
Shares of Common Stock issuable upon conversion of senior secured convertible promissory note 8,695,652
Senior secured convertible promissory note, interest rate 3.00%
Senior secured convertible promissory note, maturity date Dec 31, 2012 Dec 31, 2012
------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet21.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
GOING CONCERN - Additional Information (Detail) (USD $)
3 Months Ended 9 Months Ended 12 Months Ended 155 Months Ended
Aug. 31, 2012
Aug. 31, 2011
May 31, 2000
May 31, 2012
May 31, 2011
May 31, 2010
May 31, 2009
May 31, 2008
May 31, 2007
May 31, 2006
May 31, 2005
May 31, 2004
May 31, 2003
May 31, 2002
May 31, 2001
Aug. 31, 2012
Sep. 16, 1999
Cash Flow Supplemental Disclosures [Line Items]
Deficit accumulated during the development stage $ 56,819,791 $ 55,454,819 $ 56,819,791
Net loss (1,364,972) (832,068) (250,689) (4,444,584) (3,357,882) (3,067,842) (7,230,206) (10,490,758) (8,451,942) (6,104,402) (5,567,729) (2,989,364) (1,665,090) (1,280,465) (553,866) (56,819,791)
Cash used in operating activities (1,132,630) (569,912) (2,351,630) (2,808,059) (46,292,869)
Cash and cash equivalents 57,765 972,113 190,395 1,542,025 57,765 0
Net working capital deficit 2,274,821 2,274,821
Long-term obligations, secured note maturity date Dec 31, 2012
Long-term obligations, secured note amount $ 2,000,000 $ 2,000,000
------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet22.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Detail) (USD $)
3 Months Ended
Aug. 31, 2012
Aug. 31, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based compensation, number of options issued during period 271,784
Share based compensation, number of options exercised during period 400
Stock option exercisable expiration period 10 years
Share based compensation, number of stock options outstanding 2,642,191
Aggregate unrecognized compensation cost of unvested options $ 422,552
Share based compensation cost, latest recognition date Jul 31, 2014
Share based compensation, number of stock options granted during period 400,000
Share based compensation, number of stock options expired during period 26,736
Stock Incentive Plan 2003
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares reserved for grants of options 900,000
Share based compensation, number of options issued during period 88,800
Share based compensation, number of options exercised during period 800
Operating Expense
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation cost included in operating expenses $ 195,997 $ 75,859
Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Potentially dilutive securities 2,642,191 1,538,927
------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet23.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
Fair Value of Assumptions of Options Estimated on Grant Date (Detail) (USD $)
3 Months Ended 155 Months Ended
Aug. 31, 2012
Aug. 31, 2011
Aug. 31, 2012
Assumptions used to Determine Fair Value Options [Line Items]
Dividends per year $ 0 $ 0 $ 0
Volatility percentage 97.50% 97.50%
Risk free interest rate 3.47% 3.47%
Weighted Average Fair Value $ 1.07 $ 1.1 $ 2.41
Minimum
Assumptions used to Determine Fair Value Options [Line Items]
Volatility percentage 90.00%
Risk free interest rate 2.07%
Expected life (years) 7 years 5 years 3 years
Maximum
Assumptions used to Determine Fair Value Options [Line Items]
Volatility percentage 112.00%
Risk free interest rate 5.11%
Expected life (years) 10 years 9 years 10 years
------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet24.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
RELATED PARTIES - Additional Information (Detail) (USD $)
3 Months Ended 12 Months Ended 1 Months Ended
Aug. 31, 2012
May 31, 2012
Chief Executive Officer and Director
Mar. 01, 2010
Monthly Payment
Related Party Transaction [Line Items]
Options issued to director and chief financial officer 400,000 450,000
Payment for the use and occupancy, and administrative services, related to principal offices $ 500
------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet25.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
SENIOR SECURED CONVERTIBLE NOTES - Related Party - Additional Information (Detail) (USD $)
3 Months Ended 1 Months Ended
Aug. 31, 2012
Feb. 11, 2011
Niobe Ventures, LLC
Senior Secured Convertible Notes
Nov. 11, 2009
Niobe Ventures, LLC
Senior Secured Convertible Notes
Dec. 02, 2009
Niobe Ventures, LLC
Senior Secured Convertible Notes
Debt Instrument [Line Items]
Secured note payable $ 2,000,000 $ 1,000,000
Secured note payable, interest rate 3.00% 3.00%
Secured note payable, maturity date Dec 31, 2012 Dec 31, 2012 Nov 13, 2012
Accrued interest on secured note payable 37,500
Shares issued upon conversion debt instrument 4,510,870
Secured note payable, additional borrowing amount 2,000,000
Proceeds from issuance of secured note 2,000,000
Common stock, per share price $ 1.2
Convertible debt instrument, beneficial conversion feature $ 1,616,667
Debt instrument, remaining discount amortization period 22 months
------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet26.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
SENIOR SECURED NOTE - RELATED PARTY - Additional Information (Detail) (USD $)
3 Months Ended 1 Months Ended
Aug. 31, 2012
Jun. 05, 2012
Niobe Ventures, LLC
Senior Secured Notes
Feb. 01, 2012
Niobe Ventures, LLC
Senior Secured Notes
Debt Instrument [Line Items]
Proceeds from issuance of secured note $ 1,000,000 $ 1,000,000
Secured note payable $ 1,000,000 $ 1,000,000
Secured note payable, interest rate 3.00% 3.00%
Secured note payable, maturity date Dec 31, 2012 May 31, 2014 Feb 1, 2014
------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/Sheet27.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
SUBSEQUENT EVENTS - Additional Information (Detail) (Niobe Ventures, LLC, Senior Secured Notes, USD $)
1 Months Ended
Jun. 05, 2012
Feb. 01, 2012
Aug. 31, 2012
Issuance of Debt
Subsequent Event [Line Items]
Proceeds from issuance of secured note $ 1,000,000 $ 1,000,000 $ 800,000
Secured note payable $ 1,000,000 $ 1,000,000 $ 800,000
------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2 Content-Location: file:///C:/4f4981f5_e73d_4007_b557_90db5d4ca1c2/Worksheets/filelist.xml Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii" ------=_NextPart_4f4981f5_e73d_4007_b557_90db5d4ca1c2--